Money Matters with Greg
Needing guidance on finances, or just curious about investments? Join CEO and Owner of Farrall Wealth, Greg Farrall, as he dives into all things relating to money and often interviews interesting people he is fortunate enough to call his friends.
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Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.
Money Matters with Greg
Markets rally while Washington finally agrees on something: Americans need to save more.
Ready for some good news from Washington? The SECURE Act 2.0 might be the most significant retirement legislation of our lifetime, and it's packed with opportunities you need to know about.
Have you ever wondered why politicians can't agree on anything? Well, they finally found common ground: Americans simply don't save enough for retirement. The result is a rare piece of legislation that actually works in your favor, with provisions rolling out between now and 2033 that could significantly improve your financial future.
For business owners, enhanced tax credits make offering retirement plans more affordable than ever. Companies with under 50 employees can receive credits for 100% of contributions (up to $1,000 per employee). This powerful incentive might be exactly what your small business needs to attract and retain top talent while building your own retirement security.
The legislation also addresses real-world obstacles that prevent Americans from saving. Student loan debt holding you back? Employers can now match your loan payments with retirement contributions. Worried about accessing your money in emergencies? New provisions allow penalty-free emergency savings within your 401(k). Have leftover 529 education funds? You can roll them into Roth IRAs (up to $35,000 lifetime).
Other key improvements include raising the Required Minimum Distribution age to 75 by 2033, reducing RMD penalties from 50% to 25% (with further reduction to 10% for timely corrections), and creating enhanced catch-up contributions for ages 60-63.
Whether you're building wealth through your small business, navigating mid-career planning, or approaching retirement, these changes create meaningful opportunities to strengthen your financial foundation. Don't wait to take advantage of these provisions – connect with qualified professionals to determine which strategies align with your financial goals.
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.
The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may suit you, consult the appropriate qualified professional before deciding.
Welcome to Money Matters with Greg where we dive into the money conversations shaping your life, From investments to estate planning, insurance to taxes. We cover it all with a fresh perspective. Join Greg and his guests each week to get inspired and take control of your financial future. Let's get started. Securities and investment advisory services offered through LPL Financial, a registered investment advisor, member FINRA SIPC.
Speaker 2:Hey there and good afternoon. It's Greg Farrell, ceo and President of Farrell Wealth. This show is Money Matters with Greg. It's a show about money. We talk here on WVLP 103.1 FM and are thankful for the opportunity to be able to speak here and talk about finances for the next half an hour or so Some of the things we might be able to help add some value to your family and add some money to your pocketbooks. So excited to be on here again today.
Speaker 2:It is the week of June 23rd. It seems like a blur. I just got off vacation, which is fantastic. I'm sorry to miss you guys. Last week we podcast here on Apple and anywhere really you pod, spotify, you name it but the show's broadcast to be VLP and I was away with the family. I was very excited to be able to put everybody together and very honored by all their presence, that everybody could enjoy a week with dad and mom and have a good one. So we had a great time. It's back to it here, it's back to business and we are ready to rock and roll here on Money Matters with Greg, with WVLP and being on the station.
Speaker 2:I wanted to mention July 11th is a fundraiser that we're having here in Valparaiso, indiana, and locally we're having it here at Hog Roast at Butterfield Pavilion. It's a wonderful pavilion. It's been redone the last couple of years. It looks fantastic. It's from 4 to 8 on July 11th, which is a Friday, so stop on by if you're around locally We'd love to see you. It's a Mexican fair in celebration of Cinco de Mayo and we're going to go Mexican this year. They've done hog roast in the past, but they're going to go with Mexican this year. So we're happy to support that, happy to be a proud sponsor of that event for WVLP 103.1. So come on out, we'd love to have you and love to see you as well.
Speaker 2:Some of the things we're going to talk about today we're going to talk about the market, which unfortunately, I have to talk about the market again because it's just been necessary with the way things have moved in regards to the recent geopolitical news that you might have heard of. There was a couple of things that happened over in Iran. And then I want to talk about the second, really the end of this session today. Second, really the end of this session today. As far as this episode, I really want to mention some of the things that the Secure Act 2.0 came out with a little while ago, a couple of years ago, even back in 2022. The Secure Act was in 2019, and then 2022 was revised with more additions, and then 2022 is revised with more additions. I want to be able to kind of update you on those, because those provisions and those things are coming about here in 2024, 2025, 2026. Many of the things that the IRS has not even ruled on yet, but they are coming. I want to be able to mention to you some of the things that might really be helpful for you overall.
Speaker 2:So, with that being said, shows Money. Money is with Greg. I'm Greg Farrell, ceo and president of Farrell Wealth. It's a wealth management firm here locally in Valparaiso, indiana, serving clients in 22 states nationwide. We work with a lot of high net worth, ultra high net worth individuals and families, and then also do a lot of retirement planning. In regards to businesses and retirement planning, we're going to talk a little bit about that when I get in the Secure Act 2.0 today and again, catch us wherever you spot it, wherever you pod.
Speaker 2:The podcast will be up and running in a day or so from this episode. It'll be episode 159, which is crazy and then we'll be on YouTube as well. So you can catch us on the YouTube channel at Ferrell Wealth, and all of our socials are at Ferrell Wealth. It's like Will Ferrell, pronounced like Will Ferrell, but he spells his name wrong it's F-A-R-R-A-L-L A R R A L L W E A L T Hcom. So, with that being said once I want to mention real quick we are excited for the next few weeks to be sponsors of the TBT basketball tournament that's nationwide, that has alums from all different universities and also programs out there, as far as charities as well. For a million dollar prize money winner takes all competition. If you've never seen it, it's incredible. And we are going to help sponsor the Valparaiso University team that is out of Valpo. So we're very excited about that. So I'll have more information on that in upcoming episodes, but be on the lookout at the TBT tournament for our new company, fairwealth NIL, that will be sponsoring that company, that company or that team. That company is a new company that started about a year ago helping college athletes with managed financial literacy for their NIL dollars and hopefully helping them save for the future. So we can talk more about that later.
Speaker 2:In the meantime, I want to rock and roll here and get right into the overall markets and just say, hey look, tuesday was quite a day. This is, you know, broadcasting here on Thursday at one o'clock and then replayed on Saturday and just last Tuesday we hit record highs thanks to the de-escalation of the geopolitical tensions that happened and also dovish reaction to Chairman Powell's testimony from the Federal Reserve before Congress. It really gapped higher on the open amid the broad wave of global risk on money flows after President Trump announced the ceasefire between Israel and Iran A big shift in global geopolitical landscape for sure. That's really been weighing on stocks recently, with oil going all the way up to $75 a barrel and now going all the way down to 65, which is a huge help to the consumer. Uh, like I said, outside of all that, and what happened over the weekend? Um, with uh, the nuclear bombings that actually happened. Um, that looks like it's going to create that. That ceasefire did create. The ceasefire then ultimately talks here in the next few days. Um was the chairman powell's fomc.
Speaker 2:Uh comments about sort of a quote-unquote remain, wait and see. Uh mode. Uh, his semi-annual testimony before Congress. He sort of noted to policymakers that we remain well positioned to react to incoming data. And that's interesting because the Consumer Confidence Index fell more than five points this week to 93 from 99. We're expecting a slight rise to 99. And then two home price reports unexpectedly fell into negative territory in April.
Speaker 2:So, given Powell's sort of data-dependent commentary, treasury's really you know Treasury's rallied. They caught a bid for sure and rate cut expectations kind of shifted to the favor of the doves, which further supported the rally. So we'll see where this goes from here. But it's just interesting to see where we are in regards to the markets. I mean S&P 500 has rallied here over 6% in the last three months. Over 6% in the last three months we have now are up 3% for the year where we were previously down. And you know, we'll just kind of see how this goes. Since our I think 154th episode where we talked with our chief investment officer, john Farrell, and John and I talked about where the you know where the market was and how things were pretty beat up, since that we've rallied almost 7%. So you know, staying invested, investing in the right things, is, of course, the right thing to do, and investing in a diversified portfolio as well is what we advocate across the board.
Speaker 2:You can check out my Modern Portfolio Theory episode that I just recently published a few weeks ago too and you can find that obviously again anywhere you pod All right. So station identification it's 103.1 FM WVLP. We're happy to be here today Broadcasting the show's money manager, greg. I'm Greg Farrell, ceo and president of Farrell Wealth. It's a wealth management firm, financial advisors, registered, licensed financial advisor Helping people with their money and hopefully helping you with yours as you go out throughout your days, and maybe I can add some value to your lives, you know, on a daily basis. So one of the things I wanted to be able to mention was this legislation that came out of Washington, which not a lot of legislation that comes out of Washington is very agreeable or very good at all in my opinion, but this one was actually one of my favorite things that has come out of Washington in probably my lifetime. In regards to the fact that in Washington, many politicians can never really seem to agree on much. They're very good at disagreeing and very good at not agreeing.
Speaker 2:And this doesn't really create an environment that we as taxpayers appreciate. Quite honestly, we kind of wish they'd all get along and figure it out and not be so vehemently against each other's positions. But one thing that they can get into in agreement with is the fact that Americans don't save enough money, and we find that this is absolutely the truth. And we find that this is absolutely the truth, and I'm sure you can pretty much relate to it too, because we should all be saving more money for our retirement, and most Americans don't. That would really incentivize individuals to save for retirement, while increasing the access to workplace plans as well, and maybe more access to it. So the new law included a number of provisions intended to benefit individuals as well as small business owners, and as a small business owner myself and I have been since I was 23,. Small business owner myself, and I have been since I was 23, I want to be able to make sure everybody knows about what exactly went down and what exactly you can take advantage of overall, all right. So one of these things that I wanted to be able to mention was this enhancement of tax credits Me as a business owner since I was 23 and multiple different businesses that I've started and run, and now with Farrell Wealth, and now with Farrell Wealth NIL, I have an opportunity to be able to, as a business owner anyone does establish a retirement plan and be now incentivized with tax credits for small businesses. It's really, really nice. These all started in the beginning of 2023. But employers with up to 50 employees are eligible for a credit equal to 100% of the amount contributed by the employer, up to $1,000 per employee. So on the larger side, 50 to 100 employees or over 50 employees, which is a really solid small business the employer receives a credit equal to 100% in the years one and two and then 75% in the year three, 50% in fourth year and the 25% in the fifth year. So a huge credit for being able to start this. So it kind of phases out as the number of employees exceed 50 during a taxable year and any employees earning more than $100,000 per year are excluded. But it's a really nice incentive and the current three-year startup credit is equal to 50% of plan expenses up to a cap up to $5,000. So even smaller businesses below 50 can. If you start up a brand new plan, you can get a credit up to $500 each year over three years, which is really nice. So that's an extra $1,500 in incentive that you didn't have before and these are all really coming about. It's interesting the IRS really hasn't even ruled on some of these things, but Congress came out with it and they said this is what we're doing, and the IRS has been very slow to rule on any of this, but it's out there and I just want to let you know that it is and it is something that's available to you as a business owner, but also some of these provisions are available to you, um, as a participant in a plan, if you currently have a plan uh today. So this is secure act of uh 2019 raised the age of rmds.
Speaker 2:The second one is really changing the requirement minimum distribution number. Secure Active 2019 raised the age of RMDs from 70 and a half to 72. Most everybody knows that and then from 72 to 73 in the year 2023. And then 75 in 2033. So that's going higher. Earlier drafts in the Secure Act 2.0 had a phase in period with a gradual increase to 75 by 2023. The final version does not include a phase-in and will simply raise the RMD age from 73 to 75. So basically, what that is is you are required to.
Speaker 2:Uncle Sam's never seen your account that it's been in a 401k or an IRA. You've always been deferring that money and that deferring. As far as that tax. You've been deferring it and deferring it and deferring it. It used to be now 70 and a half. They wanted their money and you owed a percentage of that money. Whether you're male or female, the table's different and comes out every single year with the IRS and you can Google it. It's a small percentage initially, but they want their money. You're forced to take out some of that money. You're not just let it grow tax deferred for all these years, which really makes people frustrated if they don't need the income. But that is what it is. And so that was 70 and a half. Well, that went to 72 and now 73 and then ultimately 75, which is nice. You get to grow that money even more without having to touch it, without having to pull that money out and requiring you to that minimum distribution.
Speaker 2:So the other thing that it did was actually it reduced a penalty on a tax for the failures for an individual to take a minimum distribution from. It was really severe. At one point it was 50 percent, so now it's down to 25 percent Plus. If you do, they allow you to correct it. So if the failure is corrected in a timely manner, the excess tax is reduced from 25% to 10% and these changes are in effect as of 2023. So if you're making a mistake on your required minimum distribution and again you want to add up all the different IRAs you have because you're required to take a total from one or a total from all of them, however, you want to do it. If you want to add them all up and take it from one, you can do that. These changes are pretty nice and you know so I don't do it. I forget to to do it whatever and I try to fix it. And the time the manager said 10% penalty, which is certainly not as severe as 50. So that's really, really nice. It's basically a self-correction that you're able to self-correct on your own as an individual.
Speaker 2:The next thing that they added was a catch-up contribution that would increase the changes from earners over $145,000. Big, significant change to catch-up contributions in the Secure Act 2.0. First was the effective in 2024 that all catch-up contributions for individuals earning more than $145,000 per year must be made on a Roth or after-tax basis. Now, this does not apply to simple plans, but if you have a simple plan but that's really nice because then you can actually add into a Roth if you are earning over $145,000, which, if you're filing jointly, you're probably not eligible for a roth anyway, and there's no roth salary contribution limits inside of a roth 401k, which is nice. So you can ask me more about that later. By the way, if you want to ever ask me any questions, just email me at greg ferrowaltcom and I'd be happy to uh email you back back with responses or call you or whatever it might be you need and help you out.
Speaker 2:The second catch-up contribution that's really cool is once you turn 50, you're allowed to have a catch-up contribution. They change it every year. It goes up. It was $7,000. Now it's $7,500. It's going to $8,000. It'll go to $8,000. It'll go to $8,500. It'll go to $9,000 down the line. But what they're also adding in the new Secure Act 2.0 is individuals between the ages of 60 and 63 are now eligible for a higher catch-up contribution in addition to their current catch-up. So current laws, like I said, allow for the catch-up contributions to be about $7,500. But, effective in 2025, individuals would be able to contribute the greater of $10,000 indexed, or 150% of their regular catch-up, which would be about $11,250 in 2025, 2023. Now, for simple plans, individuals would be able to contribute greater of $5,000, which would be about $5520 in 2023. So you know, again going into 2025, you're going to have to figure this out. Obviously, you can work with an accountant on this to make sure that you have the numbers right.
Speaker 2:Another thing that was added that needs to be mentioned is there's a self-correction of inadvertent new IRS employee plans compliance resolution system, like everything in the IRS and the government, has some sort of acronym and it's called the EPCRS. You can Google it Without a submission to the IRS. The rule does not apply if the IRS discovers a violation of an audit on an audit, or if the self-correction is not completed within a reasonable period after a failure is identified. Now, whatever that reasonable period is, we'll see, but anyway, nice offering for you to be able to fix it if you've got a problem. So the other thing, too, is it added was matching contributions for student loans and payments. Now, as an employer, you can actually if you have a match and most employers have three, five, six, 10% matches, you know, and recognizing that many individuals are not able to contribute to workplace plans because they're paying back student loan payments.
Speaker 2:Secure Act 2.0 includes a provision aimed at encouraging younger workers to begin saving for retirement. So what they allowed is the employer to use that match for all contributions under a 401k, 403b or a simple IRA plan based on a participant's student loan payments. Government employers would also be permitted to make matching contributions to a 457b plan for their retirement or any other plan with respect to such payments plan. With respect to such payments, this provision started in 2028, 2024, sorry. So that's big.
Speaker 2:Because with a lot of you know students coming out of school, they have student debt. You as an employer can use that as a you know, an attraction attracting good talent to say, look, we hear you, we're going to take our 3% match and put it towards your college debt. Now there's no necessary rule on finding out what that debt is or how that debt looks. Every employer is different, so there's no rule coming saying look, you have to go verify that the student now the new employee has student loans. There are other. Each employer is allowed to do it, however. They like to be able to make sure that they are really being truthful and the match does go towards that student debt. So that's a per business owner policy that you're going to have to come up with and put together, but really nice. I mean, it's a great rule, it's a great offering.
Speaker 2:The other thing is, too, is auto enrollmentenrollment and auto-escalation in most new plans are required. Beginning in 2025, all new 401k and 403b plans will be required to include automatic enrollment for all eligible employees, up to a minimum of 3% and a maximum of 10% of eligible compensation, of eligible compensation, and they also have automatic escalation, which means you increase your contributions at one percentage point per year to at least 10% and a maximum of 15% each year, which is really nice. So plans in existence before the date of enactment would be grandfathered in or not subject to these requirements. But then there's also an exception with government plans, church plans, employers with 10 or few employees and new businesses within the first three years of operation, and additionally, it does not require an employer to have a plan, but instead applies to employees deciding to start a plan, which is nice. It's actually well thought out to say look, we already had a plan, we shouldn't be required to do auto-escalation and auto-enrollment like other people now that are just starting out as a new plan, so it makes a lot of sense.
Speaker 2:The next thing that they added was effective in 2023. Simple, and SEP contributions for employees and employers can both be made on a Roth basis. The employee must select the Roth treatment to make sure that that is valid. Oh, and I forgot to mention, like the employee, if they'd want to not enroll in the 401k, they just have to defer and say I don't want any match, I don't want any automatic enrollment, I don't want to automatically be in because I basically opt out. So that's back to the previous one as far as the listing goes. If you opt out, you're not going to get anything, which doesn't really make much sense because it is free money from your employer.
Speaker 2:The other thing that really helped was they added two ways to save for emergencies through a 401k plan. It enables emergency savings accounts to be created within 401k plans, which will allow employees to save for these emergencies that make withdrawals without a penalty. So a lot of times, plans allow for loans and employees get in trouble for whatever reason. They have a health, they have a crisis in life, they have a healthcare crisis. They have a health, they have a crisis in life they have a health care crisis or issue and they end up tapping into their 401k. Well, this is a nice way to prevent that in the fact that there is a cap of $2,500 in emergency cash savings that you can put in, and contributions must be made on a Roth basis so that distributions can be non-taxable regardless of how it's distributed. But employee contributions can be made towards the emergency savings account. Employers must match the contributed amount into a standard portion of the plan and not the emergency savings account, at the same rate that they match regular contributions to the plan. So employers still have to match in a separate bucket, but employees can put away enough to get enough saved up up to $2,500.
Speaker 2:And this is really intended to support individuals who want to save but are fearful of having assets tied up in a retirement plan and having been unable to access it without the penalty, which is 10% if you're under the age of 50, nine and a half, which is brutal, and you have to pay taxes on it. This way, it goes into a Roth. You can pull up to $2,500 if you have an issue, which is nice. So, additionally to that, there is a provision that will no longer. Subject emergency distributions from retirement plans or IRAs, with that 10% penalty. Like I mentioned, There'll be a limit of one distribution per year and that distribution cannot exceed the lesser of $1,000 or the excess of the individual's vested benefit over $1,000. This provision started in 2024. So, again, the IRS still hasn't even ruled on this, but it's available and you know you should be talking to your.
Speaker 2:These are not required if you had a previous plan that was set up years ago. They're not required by business owners to incorporate these, but these are things you can ask for as an employee because they're available. Now Say, hey look, do you know about this? I was listening to this podcast and it'd be nice to have the offerings. Do you know about even a match going to a Roth, which is another new offering, which is the next offering? So you are now, as an employer, allowed to contribute to your employees' matches in a Roth situation. These contributions can go into 401k, 403b and even government 457bs. And it's really nice because before you always had to throw that money into a tax deferred bucket for the employee. Now you can actually contribute that match in a Roth, which is even better. And then one of the last ones is you can rollover excess 529 assets to a Roth IRA. So for the beneficiary that you have, let's say, a kid you saved money for, gets a scholarship and doesn't need, you know, and is left over 529 money, you can always just roll that into a tax-free rollover to a Roth IRA now which is in brand new provision and it's I think it's magic.
Speaker 2:We're huge fans of Roths and want everybody to have one if they're eligible. The beneficiary of a Roth account or a 529 account and a Roth IRA they've got to be the same and the 529 account of the beneficiary must have been maintained for at least 15 years. So there are rules on this. You can't just show up and do it, but it is doable. The rollover could be subject to the lesser of the Roth IRA limits, which is obviously income limits and the aggregate amount really contributed to the 529 account over the previous five years as well. There's a per-beneficiary lifetime limit of $35,000, but really nice, because nothing's better than giving a paid-up Roth IRA to any beneficiary that they can grow tax-free for the rest of their life. So it's really aimed at supporting the middle income savers who have been making contributions to a 529 plan in lieu of saving for their own retirement. Now they can actually work on themselves instead of their kids as far as this goes, and have the options to be able to do it.
Speaker 2:So, with that said, we always like to be able to make sure that we offer our clients as many options as possible and just present them. Whether they fit for a client or not it ultimately depends. But as far as being educated and being informed, I hope that these provisions allow you to be able to go to your employer or allow you to be able to put more money away in some sort of mechanism, allow you to be able to roll over your 529 kid to your kids or even your grandkids. So you know. If you didn't know about them before, there you go. If you knew about them before, hey, go for it. And I highly recommend you just keep on consulting, obviously, tax attorney, tax accountants and your financial advising team. But, with that being said, that's what we're trying to bring to you here is adding some value on the show. So the show is Money Matters with Greg I'm Greg Farrell, ceo and president of Farrell Wealth and with Money Matters we try to bring some value to you guys out there in the listening audience here on WVLP FM 103.1, locally to Valparaiso, indiana, and then also streamed as well at wvlporg and then, of course, in our podcasting world that we have out there as far as when have you Pod, spotify, apple, you name it?
Speaker 2:Next week I'm going to talk about the Goldman Sachs 10K SB program that I was a part of and I've been honored to be a part of. I want to give some really nice solid time to what that is and how that works and how that might be able to help some small businesses out there. I was flattered and honored to be part of the inaugural class in the state of Indiana and we just graduated last week. We're all pretty tired because they beat us up pretty badly, but I'll explain more about that later in another event. So in the meantime, thanks for listening, thanks for being a part of this, and have a fantastic and profitable week. We'll see you.
Speaker 1:Thanks for tuning in to Money Matters with Greg. We hope you gained some valuable insights today. Remember, your financial journey is personal, but you don't have to go it alone. If you enjoyed the show, be sure to subscribe and share Until next time. Here's to making your money work for you. Securities and investment advisory services offered through LPL Financial, a registered investment advisor, member FINRA, sipc.
